Softer than expected CPI print helping stocks but doesn't seem like fixed income is playing along. 10-year auction today will be quite interesting.
With inflation expectations (prices paid readings in ISM, NFIB and survey based data) all showing positive inflation momentum is expected to continue due to tariffs, it will remain very difficult for the Fed to provide accommodation to the slowing growth dynamic that has begun.
This stagflationary backdrop should be bad for multiples and bad for earnings, not exactly the best outlook for US equities, especially combined with continuation of repatriation outflows from US into overseas markets with improving narratives about defense/infrastructure spending.
Vol is elevated and we are in negative gamma so short term rallies can be fierce but this is still a sell the rips market. https://x.com/ces921/status/1899805876644438156
Despite CPI coming in lower than expected, enthusiasm seemed lacking. Dow could only put on barely a 200pt gain at the start intraday before being sold off in late morning hitting -430pts peak low and closing -82pts lower. S&P500 hit an intraday low of 5546 before closing +0.49% at 5599 on Mag7 stock rebound with Nasdaq +1.22%.
More ominously, an oversold DXY got no bid compounded by weaker CPI numbers putting chances of a Fed rate cut higher.
Gold and Silver making moves overnight. Gold is at $2933 +$18, Silver stayed above $33 at $33.22 and AUD silver actually made all time high of $52.82 before closing at $52.55. GDX and GDXJ mildly higher by +0.14% and +1.43% respectively.
Team Trump's most watched indicator, US 10yr yields look to have bottomed and rose +0.7% to 4.32pc despite softer inflation data.
BHP and Rio declined -2.85% and -1.73% probably on metal tariffs headwinds, while local copper producers were all in the green, Southern Copper +1.67%, Freeport +2.51%, First Quantum +3.23%
Markets have been oversold so the rebound came courtesy of a lower than expected CPI, but I believe it is more short covering and sell the rip rather than buy the dip.
There will always be people wanting to buy in at the open, thinking that this downdraft is over. Remain wary.
